Specter's bill may resemble the measure proposed last year by Representative Peter Welch (D-Vt.). Welch wants to prohibit payment networks [image-nocss] including MasterCard Inc. and Visa Inc. from setting higher interchange for premium cards. Banks use interchange revenue to help pay for rewards programs, which have become more lucrative as banks seek to retain affluent customers.
"It is expected to be imminent," James R. Biery, CEO of the Pennsylvania Bankers Association, said in an email obtained by Bloomberg recounting a conversation between Specter and association staff.
Specter's legislation could address issues such as merchant ability to offer discounts for cash, minimum/maximum rules and the "honor all cards" rule, said the National Association of Convenience Stores (NACS) in its latest Washington Report. It would address transparency from all angles including the Federal Trade Commission (FTC) and consumer disclosure, it added.
Representative Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said last week at a conference in Washington that interchange "is not on our agenda this year." (Click here for previous CSP Daily News coverage.)
Welch attributed Frank's decision not to include his bill on the committee's 2010 agenda to "gridlock" in the Senate. "He doesn't want to necessarily spend time moving things here when there's been so little response in the Senate," Welch said of Frank, who held an October 8 hearing on the bill. "What I know is, when there's an action there's a reaction, and if you actually had the Senate take leadership and pass something, that would be a factor for House leadership, including Barney Frank."
Merchants including Wal-Mart Stores Inc. and Target Corp. have asked Congress to reduce the fees, which generated an estimated $48 billion in 2008, according to the National Retail Federation (NRF). The payment networks that set the rates and the banks that collect the fees have said the system helps merchants by guaranteeing payment and simplifying record-keeping.Richer credit-card rewards hurt "mom-and-pop" merchants and U.S. interchange fees are the highest in the world, Welch has said. The fees, averaging about 2%, are deducted at the point of sale.
The Electronic Payments Coalition (EPC), a trade group whose members include San Francisco-based Visa and Purchase, N.Y.-based MasterCard, said Welch's bill would hurt consumers. The legislation would "open up the door for bait-and- switch advertising schemes, charging additional checkout fees at the register and discrimination against certain cardholders," coalition spokesperson Trish Wexler said in a statement.
NACS vowed to continue the fight. "With main street businesses and consumers hurting, and banks announcing increased bonuses at the same time they announce more fees, it is past time for Congress to act on swipe fee reform. We plan to work until needed reform becomes a reality," Lyle Beckwith, the group's senior vice president of government relations, told Finextra.com in a separate report.
(Click here for previous CSP Daily News coverage of the interchange issue.)
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